George Soros's 1987 account of his investment philosophy — centered on the concept of reflexivity, the idea that market participants' perceptions influence market fundamentals, creating feedback loops that can drive markets far from equilibrium.
Reflexivity in markets: Soros's central concept is reflexivity — markets are not merely passive reflections of underlying economic fundamentals but active participants in shaping those fundamentals. Investors' expectations affect prices, which affect corporate decisions, which affect fundamentals, which affect expectations. This creates boom-bust cycles that can diverge dramatically from any equilibrium. Soros applies Popper's philosophy of science (particularly fallibilism — the idea that our theories of reality are always partial and subject to error) to market theory. The concept challenges efficient market hypothesis assumptions.
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